ACIT, Cir.-14(2), Kolkata, Kolkata V. The West Bengal Housing Infrastructure Development Corporation Ltd., Kolkata

ITA 246/KOL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9826 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: SAURABH BAGARIA ADV B R DUTTA
• Keywords: Business income; Capital receipt; Set aside
• Section: 143(3); 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) I.T.A. NO. 246/KOL/2017 ASSESSMENT YEAR: 2011-12 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-14(2), KOLKATA............................APPELLANT VS. M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION LTD.................RESPONDENT [PAN : AAACW 4115 F] APPEARANCES BY: DR. A.K. NAYAK, CIT, APPEARED ON BEHALF OF THE REVENUE. SHRI SAURABH BAGARIA, ADV., B.R. DUTTA, FCA & RITESH GOEL, ADV., APPEARED ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : SEPTEMBER 11 TH , 2019 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 20 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-18, KOLKATA [CIT(A) FOR SHORT] DATED 16.09.2016 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA(4)(I) WITHOUT CONSIDERING THE FINDINGS MADE BY THE AO AND THEREBY DELETING THE DISALLOWANCE MADE BY THE AO FOR RS.8,26,94,832/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE IN THE ASSESSMENT FOR ACCRUED INTEREST OF RS.35-,91,389/- ON THE SUM DEPOSITED IN THE TREASURY ACCOUNT OF THE STATE GOVERNMENT WHEN THE ASSESSEE DID NOT PRODUCE ANY AGREEMENT WITH THE STATE GOVERNMENT WHICH IMPLIES THAT THE ASSESSEE COMPANY WAS BOUND TO DEPOSIT CERTAIN SUM IN THE NON-INTEREST BEARING TREASURY ACCOUNT. 3. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED BY CONSIDERING THE INTEREST INCOME ON FIXED DEPOSIT AMOUNTING TO RS.68,52,58,292/- AS CAPITAL RECEIPT WITHOUT GIVING THE COGNIZANCE OF THE DECISION OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALIS AND CHEMICALS LIMITED VS. GIT (1997) REPORTED IN 227 ITR 172. 2 I.T.A. NO. 246/KOL/2017 ASSESSMENT YEAR: 2011-12 M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION 4. THAT, THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. AFTER HEARING RIVAL CONTENTIONS WE HOLD AS FOLLOWS. 3. GROUND NO. 1 IS ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IA(4)(I) OF THE ACT. THIS ISSUE HAS BEEN ADJUDICATED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN ITA NO. 807 TO 810/KOL/2018 DATED 17.06.2019. IT IS HELD AS FOLLOWS: 20. IN THE PRESENT CASE AS DISCUSSED BY THE AO IN ITS ORDER PASSED U/S 254/143(3) OF THE ACT, IT IS NOTED THAT THE ASSESSEE DERIVED MOST OF THE INCOME FROM SALES OF FLATS, SALE OF LAND AND OTHER INCOME TO THE EXTENT OF RS.45,10,36,135/- AND FURTHER IT IS NOTED FROM HIS OBSERVATIONS THAT THE ASSESSEE ENGAGED IN THE ACTIVITIES OF SALE OF LAND AND FLATS IN THE RELEVANT PERIOD AND ALL RECEIPTS FROM SALE OF LAND AND FROM OTHER INCOME. ADMITTEDLY THIS IS NOT THE RELEVANT QUALIFICATION TO CLAIM DEDUCTION U/S 80IA OF THE ACT, MORE PARTICULARLY THIS IS NOT THE BUSINESS REFERRED IN SUB-SECTION (4) OF SECTION 80IA OF THE ACT. WE NOTE THAT THE ASSESSEE HAS NO INCOME FROM THE ACTIVITIES OF INFRASTRUCTURE DEVELOPMENT AS CONTEMPLATED IN SUB-SECTION (4) WHICH IS PRE-REQUISITE QUALIFICATION U/S 80IA OF THE ACT. THEREFORE, IN OUR OPINION, THE SUBMISSION VIDE DATED 14.03.2017 THAT THE ASSESSEE BEING INVOLVED IN DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRASTRUCTURAL FACILITIES AND ITS INCOME WAS EARNED ALMOST ENTIRELY FROM SUCH BUSINESS ACTIVITIES I.E. DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRASTRUCTURAL FACILITIES IS CONTRARY TO RECORD I.E. P&L A/C. THEREFORE, AS RIGHTLY FOUND BY THE AO THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80IA(4) OF THE ACT AS CONFIRMED BY THE CIT(A) IN HIS IMPUGNED ORDER. 21. FURTHER, ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, THE CIT(A) FOUND THAT THE BALANCE SHEET DOES NOT REFLECT ANY INCOME EARNED FROM OTHER DEVELOPING, OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURAL FACILITIES. IT IS ALSO CLEAR THAT THE ASSESSEE DID NOT EARN ANY INCOME AS LAID DOWN IN SUB-SECTION (4) OF SECTION 80IA OF THE ACT. THEREFORE, THE SURPLUS INCOME IS ELIGIBLE FOR DEDUCTION U/S 80IA(4) OF THE ACT. FURTHER, WE FIND NO INFIRMITY IN THE FINDING OF CIT(A) IN ITS IMPUGNED ORDER THAT THE ASSESSEE HAD NO INCOME FROM ELIGIBLE BUSINESS TO CLAIM DEDUCTION U/S 80IA OF THE ACT. 22. AS POINTED OUT BY THE LD.AR, THE DEFINITION OF INFRASTRUCTURE FACILITY IS FOUND UNDER EXPLANATION TO SECTION 80IA(4)(I) OF THE ACT. WE NOTE THAT UNDER EXPLANATION (B) TO CLAUSE INFRASTRUCTURE FACILITY MEANS A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT. BUT IN OUR OPINION, THE HOUSING OR OTHER ACTIVITIES SHOULD BE INTEGRAL PART OF HIGHWAY PROJECT IN ORDER TO CLAIM DEDUCTION U/S 80IA(4) OF THE ACT. THUS, IN OUR OPINION THE DEFINITION OF HOUSING OR OTHER ACTIVITIES SHOULD NOT BE READ ISOLATED FROM AN INTEGRAL PART OF THE HIGHWAY PROJECT. 23. AS DISCUSSED ABOVE, THE CLAIM ALL ALONG BY THE ASSESSEE IN RESPECT OF PROJECT DEVELOPED AT NEW TOWN, KOLKATA. ADMITTEDLY THE SAID PROJECT IS NOT AN INTEGRAL PART OF ANY HIGHWAY PROJECT IN TERMS OF (B) OF EXPLANATION APPENDED TO CLAUSE (I) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT. NO SUCH MATERIAL EVIDENCE BROUGHT BEFORE US TO SUBSTANTIATE THE CLAIM OF ASSESSEE THAT THE NEW TOWN PROJECT IN AN INTEGRAL PART OF HIGHWAY PROJECT. AS DISCUSSED IN THE AFORE- MENTIONED PARAGRAPHS, THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM BEFORE THE TWO LOWER AUTHORITIES. IT IS NOTED FROM THE RECORD THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 02.12.2015 REMANDED THE MATTER TO THE FILE OF AO TO EXAMINE ALL THE REQUIREMENTS FOR ALLOWING THE AFORESAID DEDUCTION WITH A DIRECTION TO THE ASSESSEE TO PROVIDE ALL THE DETAILS TO SUBSTANTIATE ITS CLAIM FOR THE DEDUCTION U/S 80IA(4)(I) OF THE ACT. AS RIGHTLY POINTED OUT BY THE LD.DR THAT THERE WERE NO SUCH DETAILS PROVIDED BY THE ASSESSEE BEFORE THE AO IN CLAIMING THE SAID PROJECT IN NEW TOWN IS AN INTEGRAL PART OF HIGHWAY PROJECT. THEREFORE, IN OUR OPINION, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 80IA OF THE ACT. 3 I.T.A. NO. 246/KOL/2017 ASSESSMENT YEAR: 2011-12 M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION 24. WE AGREE WITH THE FINDING OF CIT(A) REGARDING THE BENEFIT U/S 80IA WHICH WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRE A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURE I.E. EXPRESSWAY, HIGHWAYS, THE RAPID URBAN RAIL TRANSPORT SYSTEM. WE FIND THE PURPOSE OF TAX BENEFIT AS ALL ALONG BEEN FOR PROVIDING PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE. WE ALSO AGREE WITH THE FINDING OF CIT(A) THAT THE SPIRIT BEHIND THE SECTION 80IA WAS TO ENCOURAGE TO PROVIDE INVESTMENT IN INFRASTRUCTURE PROJECT AND THE CLAIM MADE BY THE ASSESSEE IN OUR OPINION IS AGAINST THE SPIRIT OF SECTION 80IA OF THE ACT. THUS, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THEREFORE, THE ONLY ISSUE RAISED IN THIS APPEAL FILED BY THE ASSESSEE FOR AY 2005-06 IS DISMISSED. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THIS GROUND OF THE REVENUE. THE DEDUCTION GRANTED TO THE ASSESSEE U/S 80IA(4) OF THE ACT BY THE LD. CIT(A) IS REVERSED AND THE DEDUCTION IS WITHDRAWN. 4. GROUND NO. 2 IS ON THE ISSUE OF INTEREST ON TREASURY ACCOUNT. THE ASSESSEE INVERTS IN THE TREASURY ACCOUNT OF THE STATE GOVERNMENT. INTEREST INCOME OF THIS INVESTMENT IN THE TREASURY WAS ASSESSED IN THE HANDS OF THE ASSESSEE. DURING THE PROCEEDINGS THE ASSESSEE PRODUCED COPY OF A LETTER OF THE DIRECTORATE OF TREASURY AND ACCOUNTS, GOVERNMENT OF WEST BENGAL DATED 14.06.2016, WHERE IT WAS CLARIFIED THAT NO INTEREST IS PAYABLE ON DEPOSITS IN LOCAL FUND ACCOUNT BEARING NO. 8448. 5. THE LD. DR SUBMITS THAT THIS LETTER REQUIRES VERIFICATION AND THAT FROM THE LETTER ISSUED BY THE JOINT DIRECTOR, DTA, WEST BENGAL DATED 14.06.2016 IT IS NOT CLEAR AS TO WHETHER ANY INTEREST IS PAYABLE BY THEM OR NOT. 6. THE LD. COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE LD. CIT(A) AND SUBMITS THAT THE CORRESPONDENCE BETWEEN THE GOVERNMENT AND GOVERNMENT UNDERTAKING HAS TO BE BELIEVED AND THE ASSESSING OFFICER (AO FOR SHORT) CANNOT MERELY SAY THAT ORIGINAL COPIES WERE NOT PRODUCED AND HENCE THE CORRESPONDENCE IS NOT BELIEVABLE. 7. AFTER HEARING RIVAL CONTENTIONS WE ARE OF THE OPINION THAT THE ENTIRE GAMUT OF CORRESPONDENCE BETWEEN THE GOVERNMENT OF WEST BENGAL AND THE ASSESSEE HAS TO BE EXAMINED. THE CORRESPONDENCE, WHICH LEAD TO THE ASSESSEE INVESTING IN THE GOVERNMENT TREASURY, THE TERMS AND CONDITIONS UNDER WHICH SUCH DEPOSITS/INVESTMENTS WERE MADE, HAVE TO BE EXAMINED. THE TYPE OF ACCOUNTS BEING MAINTAINED, THEIR NUMBERS ETC. HAVE TO BE EXAMINED ONLY ON SUCH DETAILED ENQUIRY, IN OUR VIEW IT CAN BE CONCLUDED AS TO WHETHER THE DEPOSITS/INVESTMENTS IN QUESTION IS A NON-INTEREST BEARING DEPOSITS/INVESTMENTS OR NOT. IN VIEW OF THE ABOVE DISCUSSION WE SET ASIDE THE ISSUE TO 4 I.T.A. NO. 246/KOL/2017 ASSESSMENT YEAR: 2011-12 M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE AO SHALL ISSUE NECESSARY NOTICES TO THE DIRECTOR OF TREASURY, DIRECTORATE OF TREASURY AND ACCOUNTS AND THEREAFTER HE SHALL, AFTER EXAMINING ALL THE NECESSARY CORRESPONDENCE ADJUDICATE THE MATTER AFRESH IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 3 IS ON THE ISSUE OF TAXABILITY OF INTEREST INCOME ON FIXED DEPOSIT. THE AO HAS BROUGHT TO TAX THIS AMOUNT ON THE GROUND THAT THE ASSESSEE FAILED TO CREDIT THE INTEREST ON F.DS TO THE P&L ACCOUNT AND HAS DIRECTLY DEDUCTED THE SAME FROM PROJECT COST. THE AO WAS OF THE VIEW THAT THE INTEREST INCOME HAS TO BE TAXED SEPARATELY. HENCE HE MADE AN ADDITION TO THE BUSINESS INCOME. ON APPEAL THE LD. FIRST APPELLATE AUTHORITY DELETED THIS ADDITION BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BOKARO STEEL LTD. (1999) 236 ITR 315 . HE HELD THAT A NEXUS EXISTS BETWEEN THE INTEREST INCOME EARNED AND THE COST OF THE PROJECT AND HENCE THE INTEREST INCOME SHOULD BE TREATED AS A CAPITAL RECEIPT, WHICH WILL REDUCE THE COST OF THE PROJECT. HE DID NOT FOLLOW THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALIES & CHEMICALS LTD. VS. CIT (1997) 227 ITR 172 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT HE HAD RAISED ADDITIONAL GROUNDS ON SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2014-15, 2015-16 WHEREIN HE SUBMITTED THAT, INTEREST INCOME IN QUESTION FROM F.DS HAS ALREADY BEEN OFFERED TO TAX AND HENCE, DISALLOWING THE SAME WILL RESULT IN DOUBLE TAXATION. ON ENQUIRY FROM THE BENCH HE SUBMITTED THAT, THE FINDING OF THE LD. CIT(A) THAT THE INTEREST INCOME IN QUESTION IS IN THE CAPITAL RECEIPT, IS NOT BEING SUPPORTED BY THE ASSESSEE. HE SUBMITTED THAT THE INTEREST INCOME IS IN THE REVENUE FIELD AND THAT THE ASSESSEE HAD OFFERED THE SAME TO TAX AND HENCE IT CANNOT BE DISALLOWED ONCE AGAIN. 9. THE LD. DR SUBMITTED THAT THIS IS NOT A CASE OF DOUBLE TAXATION AND THE ASSESSEE BY REDUCING THE INTEREST INCOME FROM THE VALUE OF WORK IN PROGRESS. THUS IT CANNOT BE CLAIMED THAT THE ASSESSEE HAS OFFERED TO TAX, THIS INTEREST INCOME FROM FDRS, BY FILING ITS RETURN OF INCOME. ON A QUERY FROM THE BENCH, BOTH PARTIES AGREED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO, WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE AMOUNT IN QUESTION HAS ALREADY BEEN OFFERED TO TAX. THE AO IS DIRECTED TO VERIFY THIS CLAIM AND IF IT IS FOUND THAT THE ASSESSEE HAS NOT OFFERED THIS INTEREST ON F.DS TO TAX IN ITS RETURN OF INCOME AND ACCOUNTS, THEN HE IS DIRECTED TO BRING THE SAME TO TAX. THE 5 I.T.A. NO. 246/KOL/2017 ASSESSMENT YEAR: 2011-12 M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION PROPOSITIONS OF LAW LAID DOWN IN BOKARO STEEL LTD. (SUPRA) AND IN THE CASE OF TUTICORIN ALKALIES & CHEMICALS LTD. (SUPRA) DO NOT APPLY TO THE FACTS OF THIS CASE. 10. IN THE RESULT GROUND NO. 3 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. KOLKATA, THE 20 TH SEPTEMBER, 2019. SD/- SD/- [S.S. GODARA] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.09.2019 BIDHAN COPY OF THE ORDER FORWARDED TO: 1. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-14(2), KOLKATA. 2. M/S. WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION, HIDCO BHABAN, 35-1111, MAJOR ARTERIAL ROAD, NEW TOWN, KOLKATA-700 156. 3. CIT(A)- 18, KOLKATA. (SENT THROUGH MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES